“Beyond the Bottom Line: A Higher Purpose for Business”

Former Becton, Dickinson CEO Ed Ludwig shared ideas for how companies can operate more ethically as a guest speaker for the David J. BenDaniel Lecture Series in Ethical Leadership

November 20, 2012

As part of this year’s David J. BenDaniel Lecture Series in Ethical Leadership, Ed Ludwig, former chairman of the board, president and CEO of Becton, Dickinson and Company, delivered a presentation titled “Beyond the Bottom Line: A Higher Purpose for Business.” Speaking to Johnson students in Sage Hall Nov. 15, Ludwig discussed how and when ethics came into question in our current business model, and explained how he believes more ethical institutions could be created.

According to Ludwig, business models as we know them now are a fairly new concept within the context of our society. While Adam Smith established the basic tenets of business in 1776, the modern corporate structure didn’t exist until well into the industrial era.

“During the industrial era, people needed money to build factories and run these vast businesses, and suddenly they needed a lot more capital,” Ludwig said. “This created a whole new business and corporate structure, and this is also where the problems started.”

The problem arose, Ludwig explained, because as businesses became larger, a separation developed between shareholders and those who were actually running the business, resulting in goals that weren’t always aligned. As time went on, the separation grew and the problem was exacerbated, made even more complex by the heterogeneous nature of today’s shareholders.

“You have some shareholders that are committed and in it for the long run,” Ludwig explained, “and you have others that aren’t committed at all. It’s so easy to buy and sell stock now that you could buy one in the morning, and be out by two p.m.,” he said.

To combat these issues, Ludwig believes company leaders, employees and shareholders need to share value creation.

“Companies tend to approach value in a very dated, narrow way and only think about short term. Of course, they have to worry about making money, but companies also need to think long-term and build enduring institutions,” he said.

The way to ensure that a company endures, Ludwig believes, is to find the right CEO, the right team of employees, and, perhaps most importantly, develop a business system that maintains transparency.

At Becton, Dickinson, Ludwig said, he and his team often put together organizational fitness profiles — a survey of sorts that seeks outside perspectives on how the company is functioning. These external perspectives weren’t from consulting firms or similar services, but were obtained directly by employees.

“We could get a few of our employees to go out and talk to outsiders,” Ludwig explained. “They would get their buddies to share insights on our company, our mission, our initiatives, our structure, etc. Then we’d get together and we’d have a conversation.”

The conversations would sometimes last for hours, he said, but in the end, the company ended up with a valuable set of new perspectives.

“After every organizational fitness profile, we would emerge with a set of tools to improve, as well as with a shared value. This is crucial,” Ludwig said, “because if you have a shared value, you will be able to create a much more ethical institution.”